Filing bankruptcy may seem like the end financially… your credit score tanks and it seems like there is no way you’ll ever recover from the stigma attached to it. But, the truth is, once your bankruptcy is discharged, at some point, you will need credit again, whether it’s a different car to drive, another place to live, or any one of the hundreds of reasons why you’re going to want to start rebuilding your credit score as soon as possible.
But who’s going to extend credit to you after bankruptcy? Believe it or not, you will likely start receiving credit card offers as soon as your bankruptcy is discharged, and you will be tempted to accept those offers. But, before you do, you might want to consider the source of those offers. After bankruptcy, you will likely see offers from subprime lenders, or lenders who specialize in working with those who have filed bankruptcy, and while some of these lenders are well known, you will want to sit down and carefully review all of the terms and conditions of the offers before you accept any of them. Often there are hefty fees and astronomical interest rates associated with these types of credit cards and it may be in your best interest to consider other options to rebuild your credit score.
One of the best options available for re-establishing credit after a serious financial setback, such as bankruptcy, is to get a secured credit card. Unlike many of the subprime offers that will arrive in your mailbox, a secured credit card typically has a very reasonable interest rate and limited fees attached to the card because the credit line that you establish will be secured by a cash deposit that you make when you set up the credit card account. Other than the security deposit, your credit card account will then work just like any other credit card… you will make purchases, you will make payments on your account balance, and you will pay some interest on the unpaid balance every month.
The credit card company will then report your responsible use to the major credit bureaus and this will help your credit score in two ways. You’ll not only be rebuilding your payment history, but you will also start building your available credit, as well. These two items actually account for more than 60% of your credit score, so working on these two first only makes sense.
The other option that you have is to apply for a catalog shopping or gas credit card. Catalog shopping lenders, such as a Fingerhut Credit Account issued by WebBank , typically are much easier to work with when your credit is less than perfect, so your chances of getting approved are much higher than if you try to get a conventional credit card right off the bat. Plus, many catalog lenders offer decent interest rates, promotional codes, and low monthly payments, so you can be sure that your budget can handle the purchases you make. And, just like a secured credit card, your responsible use will be reported to the major credit bureaus, so you can start rebuilding that credit score right away.
Either way you choose to go, there are credit options available to you once you’ve filed for bankruptcy, you just have to know where to start. And once you do get started on your score, you have to be diligent – pay your bills on time, every time, keep your balances low, and don’t overdo it by applying for too much credit too soon.
Remember, it’s up to you to prove that you can handle credit again after bankruptcy!